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Section 1: 8-K (FORM 8-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): October 29, 2019

 

NABORS INDUSTRIES LTD.

(Exact name of registrant as specified in its charter)

 

Bermuda   001-32657   98-0363970
(State or Other Jurisdiction of
Incorporation or Organization)
  (Commission File Number)   (I.R.S. Employer
Identification No.)

 

Crown House
4 Par-la-Ville Road
Second Floor
Hamilton, HM08 Bermuda
  N/A
(Address of principal executive offices)   (Zip Code)

 

(441) 292-1510

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of exchange on which
registered
Common shares   NBR   NYSE
Preferred shares — Series A   NBR.PRA   NYSE

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

  

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On October 29, 2019, Nabors Industries Ltd. (“Nabors”) issued a press release announcing its results of operations for the three and nine months ended September 30, 2019. A copy of that release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

 

On October 30, 2019, Nabors will hold a conference call at 10 a.m. Central Time, regarding the Company’s financial results for the quarter ended September 30, 2019. Information about the call – including dial-in information, recording and replay of the call, and supplemental information – is available on the Investor Relations page of www.nabors.com.

 

The information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act, of 1934 or otherwise subject to liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.   Description
     
99.1   Press Release
99.2   Investor Information
104   Cover Page Interactive Data File (embedded within the Inline XBRL document).

  

 

 

  

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  

  NABORS INDUSTRIES LTD.
         
Date: October 29, 2019 By: /s/ Mark D. Anderson
    Mark D. Andrews
    Corporate Secretary

  

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

 

 NEWS RELEASE

 

Nabors Announces Third Quarter 2019 Results

 

HAMILTON, Bermuda, October 29, 2019 /PRNewswire/ -- Nabors Industries Ltd. (“Nabors” or the “Company”) (NYSE: NBR) today reported third quarter 2019 operating revenues of $758 million, compared to operating revenues of $771 million in the second quarter. Net income from continuing operations attributable to Nabors common shareholders for the quarter was a loss of $123 million, or $0.37 per share, compared to a loss of $208 million, or $0.61 per share, in the prior quarter. The third quarter’s results included after-tax charges of $23.3 million, or $0.06 per share, related to a foreign tax settlement and foreign exchange losses.

 

Anthony Petrello, Nabors Chairman, CEO and President, commented, “I believe the strength of our third-quarter results, in a weak U.S. market, is beginning to illustrate the effectiveness and ultimate value creation potential of the strategy we have implemented over the last several years. We have, and continue to be, focused on providing our customers the highest quality global rig fleet, crews and drilling technologies.

 

“For the third quarter, our adjusted EBITDA grew by more than 4%, to $207 million, overcoming the impact of the weak market environment in the U.S. Lower 48. The $8.6 million sequential increase principally arose from 10% growth in our International results. Moderate improvements in our Drilling Solutions and Canrig operations also contributed. These favorable performances, more than offset a relatively modest 3% decline in U.S. Drilling. This was attributable to fewer rigs operating in our Lower 48 operations at slightly higher average daily revenue and margin.

 

“In the U.S. Lower 48 the capability and quality of our highest-spec rigs has resulted in better utilization and high re-contracting rates with limited rate adjustments relative to competitors. The year-to-date change in our rig count is less than one-half that of the 24% that characterizes the full industry. Notably, our highest-specification rigs have been averaging approximately 90% utilization and represent 95% of our current rig count.

 

“Our Rig Technologies and Drilling Solutions segments also delivered some significant achievements during the third quarter. In Rig Technologies, our Canrig subsidiary deployed the first new generation CanrigâSigma top drive. This revolutionary new and simplified design, delivers 50% more capability with higher reliability, and lower cost of ownership. We believe these features make it the most cost-effective solution worldwide for the increasing number of difficult and complex wells.

 

“Our Drilling Solutions segment continued to increase the penetration of its advanced services. The most significant elements are the new and existing software products that enhance drilling performance, automate directional drilling and integrate tubular running operations into the rig systems. The number of installs for our NavigatorTM and ROCKit® Pilot directional drilling automation software increased by 30% sequentially. The majority of these installations are with third-party directional drilling firms, which confirms the value of these products.”

 

 

 NEWS RELEASE

 

Consolidated and Segment Results

 

The U.S. Drilling segment reported a $4 million reduction in adjusted EBITDA at $121 million.  This consisted of a $5 million decline in the Lower 48 operation, partially offset by a small improvement in the U.S. Offshore. During the quarter, the Lower 48 rig count decreased by seven rigs while average margins per rig day improved slightly to $10,231. The Company expects competitive pressures to compress daily margins by a couple hundred dollars for the next quarter. This segment’s rig count currently stands at 107, with 99 rigs working in the Lower 48. Based on the Company’s current outlook, the fourth quarter Lower 48 rig count should be around 100, and begin to increase in the first quarter.

 

International Drilling adjusted EBITDA increased sequentially by 10%, to $95 million. The quarterly average rig count declined by one to 88, while the average margin per day improved by $1,130 to $13,740. This improvement was a result of progress from initiatives to improve operating costs and favorable operating performance. The Company expects fourth quarter results similar to the third quarter, with improved cash flow generation. The anticipated incremental contribution from recent and prospective rig startups will be offset by a sequential decrease in non-cash deferred revenue, with the expiration of contracts that included upfront customer funding. These contracts have been renewed and are expected to yield higher cash flow in aggregate.

 

Canada Drilling adjusted EBITDA improved nominally to $1.5 million reflecting the beginning of the customary seasonal upturn. The average daily gross margin was essentially flat at $3,800, as was the number of rigs working during the quarter. The company expects a moderate improvement in rig count and daily margin in the fourth quarter.

 

In Drilling Solutions, adjusted EBITDA of $23 million was $1 million higher than the second quarter, despite the large decrease in the industry rig count in the Lower 48. The 4.5% sequential increase in adjusted EBITDA occurred in the face of a 3.6% decline in revenues. This was even more significant considering the magnitude of lost revenue associated with the idling of a high number of Lower 48 rigs on which NDS had been providing services. An increase in higher margin international activity, as well as integrated tubular running services (TRS) jobs in the U.S. constituted the majority of the improvement. The integrated approach reduces costs by incorporating TRS into the rig operating systems. During the third quarter, integrated TRS jobs were 41% of all jobs completed, up from less than 3% in the first quarter this year.

 

In the Rig Technologies segment, third quarter adjusted EBITDA was $2.2 million. Sequentially, this reflects a decrease of less than $1 million on a $10 million decrease in revenue, a result of lower capital equipment and spare parts shipments during the quarter. Significant cost reductions, the expansion of aftermarket repairs and recertifications, and a favorable external/internal sales mix substantially offset these revenue reductions.

 

 

 NEWS RELEASE

 

Capital Expenditures and Liquidity

 

William Restrepo, Nabors Chief Financial Officer, stated, “Quarterly free cash flow after dividends reached $74 million, as compared to $82 million in the prior quarter. The third quarter results included approximately $70 million in semiannual cash interest payments as well as significant reductions in working capital and capital expenditures.

 

“Capital expenditures were $87 million in the third quarter, $43 million less than the preceding quarter. We currently expect full year 2019 capital expenditures in the range of $400 to $410 million. This implies another $35 to $45 million reduction in capital expenditures in the fourth quarter. These results reinforce our confidence in achieving our targeted reduction in net debt of more than $200 million for the full year.”

 

Mr. Petrello concluded, “Our short-term expectations remain positive view for our international operations, with a more cautious view in North America. We remain more universally confident for all of our segments over the longer-term. International demand for higher specification rigs supports moderate growth in activity leading to improving pricing as the availability of rigs tightens. In North America, we expect to continue relative outperformance in both utilization and margins, regardless of how the market develops. We also expect our other segments to increase penetration with their technology and service initiatives. Notwithstanding the potential for near-term variances, over time we expect stable to improving consolidated results.

 

“We maintain our intense focus on improving free cash flow after dividends, returns on capital and debt reduction. Our third quarter performance bolsters our confidence we can achieve these objectives.”

 

About Nabors

 

Nabors, (NYSE: NBR) owns and operates one of the world's largest land-based drilling rig fleets and provides offshore platform rigs in the United States and numerous international markets. Nabors also provides directional drilling services, performance tools, and innovative technologies for its own rig fleet and those of third parties. Leveraging our advanced drilling automation capabilities, Nabors highly skilled workforce continues to set new standards for operational excellence and transform our industry.

 

Forward-looking Statements

The information included in this press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to a number of risks and uncertainties, as disclosed by Nabors from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, Nabors' actual results may differ materially from those indicated or implied by such forward-looking statements.  The forward-looking statements contained in this press release reflect management's estimates and beliefs as of the date of this press release.  Nabors does not undertake to update these forward-looking statements. 

 

 

 NEWS RELEASE

 

Non-GAAP Disclaimer

This press release presents certain “non-GAAP” financial measures.  The components of these non-GAAP measures are computed by using amounts that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges and other, net. Adjusted EBITDA is computed similarly, but also excludes depreciation and amortization expenses. In addition, adjusted EBITDA and adjusted operating income (loss) exclude certain cash expenses that the Company is obligated to make. Net debt is calculated as total debt minus the sum of cash and cash equivalents. Free cash flow after dividends represents net cash provided by operating activities less cash used for investing activities and cash paid for dividends. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base and pay dividends. Management believes that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies. Each of these non-GAAP measures has limitations and therefore should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA, adjusted operating income (loss), net debt, and free cash flow after dividends, because it believes that these financial measures accurately reflect the Company’s ongoing profitability and performance.  Securities analysts and investors also use these measures as some of the metrics on which they analyze the Company’s performance. Other companies in this industry may compute these measures differently.  Reconciliations of consolidated adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes, net debt to total debt, and free cash flow after dividends to cash flow provided by operations, which are their nearest comparable GAAP financial measures, are included in the tables at the end of this press release. 

 

Media Contact:  Dennis A. Smith, Senior Vice President of Corporate Development & Investor Relations, +1 281-775-8038 or William C. Conroy, Senior Director of Corporate Development & Investor Relations, +1 281-775-2423.   To request investor materials, contact Nabors' corporate headquarters in Hamilton, Bermuda at +441-292-1510 or via e-mail [email protected]

 

 

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

 

   Three Months Ended   Nine Months Ended 
   September 30,   June 30,   September 30, 
(In thousands, except per share amounts)  2019   2018   2019   2019   2018 
Revenues and other income:                         
Operating revenues  $758,076   $779,425   $771,406   $2,329,122   $2,275,539 
Earnings (losses) from unconsolidated affiliates   -    -    -    (5)   1 
Investment income (loss)   (1,437)   (1,342)   469    8,709    (4,041)
Total revenues and other income   756,639    778,083    771,875    2,337,826    2,271,499 
                          
Costs and other deductions:                         
Direct costs   475,461    497,194    496,664    1,493,082    1,466,572 
General and administrative expenses   63,577    66,813    64,415    196,159    209,207 
Research and engineering   12,004    14,458    11,920    37,444    42,703 
Depreciation and amortization   221,557    208,517    218,319    650,267    640,227 
Interest expense   51,291    51,415    51,491    155,134    173,393 
Impairments and other charges   3,629    13,770    104,180    106,007    90,434 
Other, net   5,005    9,137    6,289    30,598    24,163 
Total costs and other deductions   832,524    861,304    953,278    2,668,691    2,646,699 
                          
Income (loss) from continuing operations before income taxes   (75,885)   (83,221)   (181,403)   (330,865)   (375,200)
Income tax expense (benefit)   23,903    10,489    11,398    65,100    57,312 
                          
Income (loss) from continuing operations, net of tax   (99,788)   (93,710)   (192,801)   (395,965)   (432,512)
Income (loss) from discontinued operations, net of tax   157    (13,933)   (34)   (34)   (14,592)
                          
Net income (loss)   (99,631)   (107,643)   (192,835)   (395,999)   (447,104)
Less: Net (income) loss attributable to noncontrolling interest   (19,297)   (6,934)   (10,729)   (44,202)   (10,426)
Net income (loss) attributable to Nabors  $(118,928)  $(114,577)  $(203,564)  $(440,201)  $(457,530)
Less: Preferred stock dividend  $(4,310)  $(4,313)  $(4,312)  $(12,935)  $(7,993)
Net income (loss) attributable to Nabors common shareholders  $(123,238)  $(118,890)  $(207,876)  $(453,136)  $(465,523)
                          
Amounts attributable to Nabors common shareholders:                         
Net income (loss) from continuing operations  $(123,395)  $(104,957)  $(207,842)  $(453,102)  $(450,931)
Net income (loss) from discontinued operations   157    (13,933)   (34)   (34)   (14,592)
Net income (loss) attributable to Nabors common shareholders  $(123,238)  $(118,890)  $(207,876)  $(453,136)  $(465,523)
                          
Earnings (losses) per share:                         
   Basic from continuing operations  $(0.37)  $(0.31)  $(0.61)  $(1.33)  $(1.39)
   Basic from discontinued operations   -    (0.04)   -    -    (0.05)
Total Basic  $(0.37)  $(0.35)  $(0.61)  $(1.33)  $(1.44)
                          
   Diluted from continuing operations  $(0.37)  $(0.31)  $(0.61)  $(1.33)  $(1.39)
   Diluted from discontinued operations   -    (0.04)   -    -    (0.05)
Total Diluted  $(0.37)  $(0.35)  $(0.61)  $(1.33)  $(1.44)
                          
Weighted-average number of common shares outstanding:                         
   Basic   352,026    350,194    351,543    351,444    329,118 
   Diluted   352,026    350,194    351,543    351,444    329,118 
                          
Adjusted EBITDA  $207,034   $200,960   $198,407   $602,437   $557,057 
                          
Adjusted operating income (loss)  $(14,523)  $(7,557)  $(19,912)  $(47,830)  $(83,170)

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   June 30,   December 31, 
(In thousands)  2019   2019   2018 
   (Unaudited)     
ASSETS               
Current assets:               
Cash and short-term investments  $418,937   $395,716   $481,802 
Accounts receivable, net   613,527    737,353    756,320 
Assets held for sale   8,037    8,004    12,250 
Other current assets   339,847    325,606    343,191 
     Total current assets   1,380,348    1,466,679    1,593,563 
Property, plant and equipment, net   5,152,236    5,301,252    5,467,870 
Goodwill   90,543    90,645    183,914 
Other long-term assets   650,370    655,927    608,597 
     Total assets  $7,273,497   $7,514,503   $7,853,944 
                
LIABILITIES AND EQUITY               
Current liabilities:               
Current portion of debt  $1,058   $790   $561 
Other current liabilities   681,246    771,377    831,516 
     Total current liabilities   682,304    772,167    832,077 
Long-term debt   3,516,592    3,550,577    3,585,884 
Other long-term liabilities   313,497    321,576    280,796 
     Total liabilities   4,512,393    4,644,320    4,698,757 
                
Redeemable noncontrolling interest in subsidiary   420,217    415,042    404,861 
                
Equity:               
Shareholders' equity   2,251,705    2,381,514    2,700,850 
Noncontrolling interest   89,182    73,627    49,476 
     Total equity   2,340,887    2,455,141    2,750,326 
     Total liabilities and equity  $7,273,497   $7,514,503   $7,853,944 

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

SEGMENT REPORTING

(Unaudited)

 

The following tables set forth certain information with respect to our reportable segments and rig activity:

 

   Three Months Ended   Nine Months Ended 
   September 30,   June 30,   September 30, 
(In thousands, except rig activity)  2019   2018   2019   2019   2018 
Operating revenues:                         
U.S. Drilling  $307,808   $273,996   $323,402   $951,419   $779,393 
Canada Drilling   12,191    26,645    11,389    48,895    75,974 
International Drilling   328,278    377,125    326,905    992,439    1,123,956 
Drilling Solutions   62,286    60,923    64,583    192,291    183,430 
Rig Technologies (1)   63,106    63,641    72,751    207,610    209,631 
Other reconciling items (2)   (15,593)   (22,905)   (27,624)   (63,532)   (96,845)
      Total operating revenues  $758,076   $779,425   $771,406   $2,329,122   $2,275,539 
                          
Adjusted EBITDA: (3)                         
U.S. Drilling  $120,936   $99,353   $124,924   $370,865   $259,343 
Canada Drilling   1,466    7,294    1,069    9,981    21,556 
International Drilling   95,214    116,797    86,767    267,825    363,418 
Drilling Solutions   23,471    16,145    22,461    66,978    45,638 
Rig Technologies (1)   2,173    137    3,160    3,037    (8,101)
Other reconciling items (4)   (36,226)   (38,766)   (39,974)   (116,249)   (124,797)
      Total adjusted EBITDA  $207,034   $200,960   $198,407   $602,437   $557,057 
                          
Adjusted operating income (loss): (5)                         
U.S. Drilling  $12,427   $2,578   $20,392   $57,502   $(30,275)
Canada Drilling   (5,701)   (1,895)   (5,537)   (11,297)   (7,095)
International Drilling   2,466    25,680    (6,884)   (10,055)   74,702 
Drilling Solutions   16,145    9,506    13,793    42,793    25,773 
Rig Technologies (1)   (641)   (4,141)   496    (5,293)   (20,550)
Other reconciling items (4)   (39,219)   (39,285)   (42,172)   (121,480)   (125,725)
   Total adjusted operating income (loss)  $(14,523)  $(7,557)  $(19,912)  $(47,830)  $(83,170)
                          
Rig activity:                         
Average Rigs Working: (6)                         
U.S. Drilling   114.1    111.6    122.2    119.0    111.8 
Canada Drilling   7.7    17.9    7.4    10.4    16.4 
International Drilling   87.7    96.0    88.6    88.7    94.6 
      Total average rigs working   209.5    225.5    218.2    218.1    222.8 

 

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(1)Includes our oilfield equipment manufacturing, automated systems, and downhole tools.

 

(2)Represents the elimination of inter-segment transactions.

 

(3)Adjusted EBITDA represents income (loss) from continuing operations before income taxes, interest expense, depreciation and amortization, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges and other, net. Adjusted EBITDA is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. In addition, adjusted EBITDA excludes certain cash expenses that the Company is obligated to make. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company’s ongoing profitability and performance. Securities analysts and investors use this measure as one of the metrics on which they analyze the Company’s performance. Other companies in this industry may compute these measures differently. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading "Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes".

 

(4)Represents the elimination of inter-segment transactions and unallocated corporate expenses.

 

(5)Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, earnings (losses) from unconsolidated affiliates, investment income (loss), impairments and other charges and other, net. Adjusted operating income (loss) is a non-GAAP financial measure and should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. In addition, adjusted operating income (loss) excludes certain cash expenses that the Company is obligated to make. However, management evaluates the performance of its operating segments and the consolidated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these financial measures accurately reflect the Company’s ongoing profitability and performance. Securities analysts and investors use this measure as one of the metrics on which they analyze the Company’s performance. Other companies in this industry may compute these measures differently. A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is the most closely comparable GAAP measure, is provided in the table set forth immediately following the heading "Reconciliation of Non-GAAP Financial Measures to Income (loss) from Continuing Operations before Income Taxes".

 

(6)Represents a measure of the average number of rigs operating during a given period. For example, one rig operating 45 days during a quarter represents approximately 0.5 average rigs working for the quarter. On an annual period, one rig operating 182.5 days represents approximately 0.5 average rigs working for the year.

 

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

(Unaudited)

 

   Three Months Ended   Nine Months Ended 
   September 30,   June 30,   September 30, 
                     
(In thousands)  2019   2018   2019   2019   2018 
Adjusted EBITDA  $207,034   $200,960   $198,407   $602,437   $557,057 
Depreciation and amortization   (221,557)   (208,517)   (218,319)   (650,267)   (640,227)
Adjusted operating income (loss)   (14,523)   (7,557)   (19,912)   (47,830)   (83,170)
                          
Earnings (losses) from unconsolidated affiliates   -    -    -    (5)   1 
Investment income (loss)   (1,437)   (1,342)   469    8,709    (4,041)
Interest expense   (51,291)   (51,415)   (51,491)   (155,134)   (173,393)
Impairments and other charges   (3,629)   (13,770)   (104,180)   (106,007)   (90,434)
Other, net   (5,005)   (9,137)   (6,289)   (30,598)   (24,163)
Income (loss) from continuing operations before income taxes  $(75,885)  $(83,221)  $(181,403)  $(330,865)  $(375,200)

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF NET DEBT TO TOTAL DEBT

  

   September 30,   June 30,   December 31, 
(In thousands)  2019   2019   2018 
   (Unaudited)     
Current portion of debt  $1,058   $790   $561 
Long-term debt   3,516,592    3,550,577    3,585,884 
     Total Debt   3,517,650    3,551,367    3,586,445 
Less: Cash and short-term investments   418,937    395,716    481,802 
     Net Debt  $3,098,713   $3,155,651   $3,104,643 

 

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NABORS INDUSTRIES LTD. AND SUBSIDIARIES

RECONCILIATION OF FREE CASH FLOW AFTER DIVIDENDS TO

NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

   Three Months Ended   Nine Months
Ended
 
   September 30,   June 30,   September 30, 
(In thousands)  2019   2019   2019 
Net cash provided by operating activities  $157,192   $203,231   $430,277 
Less: Net cash used for investing activities   (75,496)   (113,760)   (333,700)
Less: Dividends to common and preferred shareholders   (7,938)   (7,940)   (41,643)
Free cash flow after dividends  $73,758   $81,531   $54,934 

 

Free cash flow after dividends represents net cash provided by operating activities less cash used for investing activities and cash paid for dividends. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset base and pay dividends. Management believes that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies. This non-GAAP measure has limitations and therefore should not be used in isolation or as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of the consolidated Company based on several criteria, including free cash flow after dividends, because it believes that these financial measures accurately reflect the Company's ongoing profitability and performance.

 

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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit 99.2

  

3 Q 19 Earnings Presentation October 30, 2019 Presented by: Anthony G. Petrello Chairman, President, & Chief Executive Officer William J. Restrepo Chief Financial Officer

   

 

2 We often discuss expectations regarding our future markets , demand for our products and services, and our performance in our annual, quarterly, and current reports, press releases, and other written and oral statements . Such statements, including statements in this document that relate to matters that are not historical facts, are “forward - looking statements” within the meaning of the safe harbor provisions of Section 27 A of the U . S . Securities Act of 1933 and Section 21 E of the U . S . Securities Exchange Act of 1934 . These “forward - looking statements” are based on our analysis of currently available competitive, financial and economic data and our operating plans . They are inherently uncertain, and investors should recognize that events and actual results could turn out to be significantly different from our expectations . Factors to consider when evaluating these forward - looking statements include, but are not limited to : • fluctuations and volatility in worldwide prices of and demand for oil and natural gas ; • fluctuations in levels of oil and natural gas exploration and development activities ; • fluctuations in the demand for our services ; • c ompetitive and technological changes and other developments in the oil and gas and oilfield services industries ; • o ur ability to renew customer contracts in order to maintain competitiveness ; • t he existence of operating risks inherent in the oil and gas and oilfield services industries ; • the possibility of the loss of one or a number of our large customers ; • the impact of long - term indebtedness and other financial commitments on our financial and operating flexibility ; • o ur access to and the cost of capital , including the impact of a downgrade in our credit rating, covenants restrictions, availability under our unsecured revolving credit facilities, and future issuances of debt or equity securities ; • o ur dependence on our operating subsidiaries and investments to meet our financial obligations ; • our ability to retain skilled employees ; • our ability to complete, and realize the expected benefits, of strategic transactions ; • the recent changes in U . S . tax laws and the possibility of changes in other tax laws and other laws and regulation ; • the possibility of political or economic instability, civil disturbance, war or acts of terrorism in any of the countries in which we do business ; • t he possibility of changes to U . S . trade policies and regulations including the imposition of trade embargoes or sanctions ; and • general economic conditions, including the capital and credit markets . Our businesses depend, to a large degree, on the level of spending by oil and gas companies for exploration, development and production activities . Therefore, sustained lower oil or natural gas prices that have a material impact on exploration, development or production activities could also materially affect our financial position, results of operations and cash flows . The above description of risks and uncertainties is by no means all - inclusive, but is designed to highlight what we believe are important factors to consider . For a discussion of these factors and other risks and uncertainties, please refer to our filings with the Securities and Exchange Commission ("SEC"), including those contained in our Annual Reports on Form 10 - K and Quarterly Reports on Form 10 - Q, which are available at the SEC's website at www . sec . gov . Non - GAAP Financial Measures This presentation refers to certain “non - GAAP” financial measures, such as adjusted EBITDA, adjusted operating income ( loss), net debt and free cash flow after dividends . The components of these non - GAAP measures are computed by using amounts that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) . A reconciliation of adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes, net debt to total debt, and free cash flow after dividends to net cash provided by operating activities, which are their nearest comparable GAAP financial measures, is provided in the Appendix at the end of this presentation . Forward - Looking Statements and Non - GAAP Financial Measures

   

 

3 Recent Company Highlights Increased U.S. Drilling average daily margins to $12,400 from $12,061 in 2Q • Modest increase in Lower 48 daily margins to $10,231 from $10,222 in 2 Q as industry rig count declines by 11% International deployments: • Successfully deployed two impactful rigs in 3Q, Argentina (1) and Kazakhstan (1) • Pending deployments in Kuwait (1), Mexico (2) and Saudi Arabia (1) Sequential adjusted EBITDA improvement in International and Drilling Solutions Continued growth in penetration of ROCKit ® Pilot and Navigator TM Deployed the first unit of the next - generation Canrig ® Sigma topdrive

   

 

4 Canrig ® Sigma topdrive • New design, 1st unit deployed • 500 Ton, 1500 Horsepower • Incorporates direct drive • Fewer moving parts • Reduced maintenance • Built - in Casing Running System

   

 

5 Financial Overview

   

 

6 Financial Summary (1) See reconciliations in the Appendix (2) Diluted Earnings (Losses) Per Share from continuing operations ($000 except EPS) 3Q18 4Q18 1Q19 2Q19 3Q19 Operating Revenues $779,425 $ 782,080 $ 799,640 $771,406 $758,076 Adjusted EBITDA (1) $200,960 $ 201,619 $ 196,996 $198,407 $207,034 Adjusted Operating Income (Loss ) (1) ($7,557) ($ 25,024) ($ 13,395) ($ 19,912) ($14,523) Income (Loss) from Continuing Operations before income taxes ($ 83,221) ($ 143,594) ($ 73,577) ($ 181,403) ($ 75,885) Diluted EPS (2) (0.31) (0.55) (0.36) (0.61) ( 0.37)

   

 

Debt Maturity Profile as of 9/30/19 All figures in millions (1) Annual figures shown at maturity value. (2) Debt balances reflect carrying values as of September 30, 2019. See reconciliation of Net Debt to Total Debt in the Appendix. (3) Availability under Revolving Credit Lines subject to covenants. Nearest Maturity in 2020 (1) Debt @ 9/30/19 Total Debt : $ 3.52Bn (2) Net Debt : $ 3.10Bn (2) Available Liquidity : $1.89Bn (3) (Revolver Capacity + Cash) (2) (2)(3) 7

   

 

8 Business Segments

   

 

Rig Fleet (1) 3Q19 Average Rigs Working Average Utilization U.S. Lower 48 AC ≥ 1500HP 119 98 87% AC Others 63 8 13% SCR Rigs 8 2 22% U.S. Lower 48 Total 190 108 67% U.S. Offshore 12 3 25% Alaska 16 3 20% Canada 41 8 20% International 149 88 58% Total Fleet 408 210 54% 9 3 Q19 Rig Utilization & Availability (1) As of September 30, 2019 Note : Subtotals may not foot due to rounding

   

 

10 Lower 48 Rig Utilization by Type As of September 30, 2019 Rig Type Total Rigs Active Total Util. AC % PACE ® - X 38 47 81% PACE ® - M750 7 7 100% PACE ® - M800 6 6 100% PACE ® - M1000 3 4 75% PACE ® - B 25 29 86% PACE ® - S 9 11 82% UPGRADED PACE ® - F 6 6 100% PACE ® - F 1 9 11% PACE ® - M550 5 47 11% Other AC Rigs 0 16 0% SCR 1 8 13% Total 101 190 53%

   

 

11 Please refer to the disclaimers on slides 2 and 3 of the presentation deck. U.S. 108 Kazakhstan 6 Venezuela 3 Mexico 2 Saudi Arabia 42 Oman 4 Algeria 2 Colombia 12 Canada 9 India 2 Argentina 10 Russia 3 Kuwait 2 Total = 205 Nabors Drilling Operations As of September 30, 2019

   

 

12 Appendix

   

 

13 Rig Margins & Activity (1) Margin = gross margin per rig per day for the period. Gross margin is computed by subtracting direct costs from operating revenues for the period. 3Q18 4Q18 1Q19 2Q19 3Q19 Margin (1) Avg. Rigs Working Margin (1) Avg. Rigs Working Margin (1) Avg. Rigs Working Margin (1) Avg. Rigs Working Margin (1) Avg. Rigs Working U.S. Drilling $ 10,540 111.6 $ 11,428 117.3 $12,350 120.9 $12,061 122.2 $ 12,400 114.1 Canada Drilling 5,352 17.9 6,492 18.3 6,055 16.3 3,764 7.4 3,799 7.7 International Drilling 15,003 96.0 13,527 88.0 12,622 89.7 12,610 88.6 13,739 87.7

   

 

14 Reconciliation of Adjusted EBITDA to Income (Loss) from Cont. Operations Before Income Taxes Adjusted operating income (loss) represents income (loss) from continuing operations before income taxes, interest expense, e arn ings (losses) from unconsolidated affiliates, investment income (loss ), impairments and other charges and other, net. Adjusted EBITDA is computed similarly, but also excludes depreciation and amortization expenses. In addition, adjusted EBITDA and adjusted operating income (loss) exclude ce rta in cash expenses that the Company is obligated to pay. Each of these non - GAAP measures has limitations and therefore should not be used in isolation o r as a substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of its operating segments and the con sol idated Company based on several criteria, including adjusted EBITDA and adjusted operating income (loss), because it believes that these fin anc ial measures accurately reflect the Company’s ongoing profitability and performance. Securities analysts and investors use these measures as some of the metrics on which they analyze the Company’s performance. Other companies in this industry may compute these measures differently. A reconciliation of adjusted EBITDA and adjusted operating income (loss) to income (loss) from continuing operations before income taxes which is the nearest compara ble GAAP financial measure, is provided in the table below. Three Months Ended September 30, December 31, March 31, June 30, September 30, (In Thousands) 2018 2018 2019 2019 2019 Adjusted EBITDA $200,960 $201,619 $196,996 $198,407 $207,034 Depreciation and Amortization (208,517) (226,643) (210,391) (218,319) (221,557) Adjusted Operating Income (loss) (7,557) (25,024) (13,395) (19,912) (14,523) Earnings (losses) from unconsolidated affiliates 0 0 (5) 0 0 Investment Income (loss) (1,342) (5,458) 9,677 469 (1,437) Interest Expense (51,415) (53,731) (52,352) (51,491) (51,291) Other, net (9,137) (5,369) (19,304) (6,289) (5,005) Impairments and other charges (13,770) (54,012) 1,802 (104,180) (3,629) Income (loss) from continuing operations before income taxes (83,221) (143,594) (73,577) (181,403) (75,885)

   

 

15 Reconciliation of Free Cash Flow After Dividends to Net Cash Provided by Operating Activities Free cash flow after dividends represents net cash provided by operating activities less cash used for investing activities a nd cash paid for dividends. Free cash flow is an indicator of our ability to generate cash flow after required spending to maintain or expand our asset b ase and pay dividends. Management believes that this non - GAAP measure is useful information to investors when comparing our cash flows with the cash fl ows of other companies. This non - GAAP measure has limitations and therefore should not be used in isolation or as a substitute for the amount s reported in accordance with GAAP. However, management evaluates the performance of the consolidated Company based on several criteria, in clu ding free cash flow after dividends, because it believes that these financial measures accurately reflect the Company's ongoing profitabilit y a nd performance . Three Months Ended March 31, June 30, September 30, (In thousands) 2019 2019 2019 Net cash provided by operating activities 69,854$ 203,231$ 157,192$ Less: Net cash used for investing activities (144,444) (113,760) (75,496) Less: Dividends to common and preferred shareholders (25,765) (7,940) (7,938) Free cash flow after dividends (100,355)$ 81,531$ 73,758$

   

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